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Tax Potential vs. Tax Effort: A Cross-Country Analysis of Armenia's Stubbornly Low Tax Collection
Author:
Mr. David A. Grigorian
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and
Mr. Hamid R Davoodi
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Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 106
Language:
English
Publication Date:
01 May 2007
DOI:
https://doi.org/10.5089/9781451866704.001
ISBN:
9781451866704
ISSN:
1018-5941
Pages:
38
Keywords:
WP; Armenia; tax revenue; tax potential; tax collection; institutions; shadow economy; tax-to-GDP ratio; CIS country; tax effort; revenue buoyancy; VAT collection; tax performance; tax morale; small share; Income and capital gains taxes; Tax administration core functions; Informal economy; Middle East and Central Asia
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Despite recording double digit growth since 2000, Armenia's tax-to-GDP ratio has been fairly stable at about 14½ percent. This paper catalogues a range of factors that may account for Armenia's stubbornly for tax collection by benchmarking Armenia's tax-to-GDP against some comparator countries and conducting an extensive econometric study of the main determinants of tax collection. We find empirical support for the hypothesis that the persistence of Armenia's low tax-GDP ratio can be traced to persistence of weak institutions and a large shadow economy. The gap between the potential and actual tax collection in Armenia could be as high as 6½ percent of GDP. We conclude with some policy recommendations that, if adopted, can boost revenue buoyancy.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund